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UPDATE: Anthem, Centene, some others may be *making* money via the exchanges

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Time: DHMS

Wed, 04/27/2016 - 1:49pm

A few months ago I noted that while UnitedHealthcare and some other carriers may be losing money hand over fist on the ACA exchanges, at least some of them are making a profit, breaking even or at least cutting their losses down to a reasonable level.

As a simple reminder, competitive markets should see some companies make money and some companies that offer more expensive and less attractive products lose money. I would be extremely worried if everyone was making money after three years, just like I would be extremely worried that everyone was losing money after three years of increasingly better data.

Obamacare critics have spent a lot of energy trying to pretend that premiums on the exchanges have skyrocketed, but that's never been true. What is true is that premiums started below projections and have since risen moderately as insurers get a better grasp on their customer base. This is how competitive markets work: players enter the market with prices designed to attract market share; customers pick winners and losers; prices adjust over time; and some companies are successful while others drop out. Eventually you reach a rough equilibrium, which we're getting close to with Obamacare.

Anthem’s first quarter earnings were better than expected as the company welcomed 1 million new customers across its businesses since the end of last year, including 184,000 who signed up for coverage on public exchanges under the Affordable Care Act.

In contrast to UnitedHealth Group UNH -0.92%, which is scaling back to a handful of public exchanges to sell individual policies, Anthem ANTM -1.84% sees the so-called Obamacare business as a growth opportunity. Anthem, which sells policies under the Blue Cross and Blue Shield brand in 14 states, expects to remain in those markets next year with the potential for expansion should its merger with Cigna CI -0.57% be approved.

“I think a sustainable model can be built,” Anthem chairman Joe Swedish said of public exchanges in an hour-long conference call this morning with analysts. “This remains a dynamic marketplace. Over time, we do believe we are well positioned for sustained growth.”

...Anthem executives said they see a positive margin on the public exchange business of between 3% and 5%, though it could “expand,” executives said.

Unfortunately, I don't know exactly how many exchange enrollees Anthem ended the year with; it was at 824,000 as of 9/30/15. Assuming roughly a 5.4% drop (consistent with the drop nationally from 9.3 million to 8.8 million), that would be roughly 780,000, so increasing exchange enrollment by 184K should mean roughly 964,000 people as of Q1 2016, or roughly a 24% increase.

In addition, I've been informed that I'm misreading Anthem's statement; apparently they're projecting a 3-5% profit margin on exchange plans in the near future, not saying that they've made a 3-5% profit this quarter. Important distinction.

While losses in the Obamacare exchange markets is chasing insurance giant UnitedHealthcare away, New England insurer Harvard Pilgrim Health Care says the exchange business is a moneymaker..

"We've seen tremendous growth," said Beth Roberts, senior vice president of enterprise sales and marketing, who heads up the regional markets.

The nonprofit Harvard Pilgrim is in the exchange business in New Hampshire, Maine and Massachusetts, though the latter market is a different animal due to the Massachusetts Health Connector, an Affordable Care Act-type program in that state.

Because of the Connector program, New Hampshire and Maine had a higher percentage of the population that was uninsured than Massachusetts when Harvard Pilgrim entered those markets.